Path 2

Path 2

Black Gold Vs. Corporate Gold

June 30, 2008

The press is oblivious to the real link between Alaska refuge drilling and corporate taxes.

The money pumped out of our staggering economy by tax breaks for the corporate rich during the Bush Era dwarfs the tax revenues we would wind up extracting from wrecking the Alaska National Wildlife Refuge.

And the amount of oil we could squeeze out from new drilling in Alaska is a stain on your driveway compared with world oil output.

An unpublicized Congressional Research Service (CRS) report reveals that the tax-revenue scheme at the heart of the mania for more drilling into Alaska is far from certain to work.

And it would produce small change compared with the corporate tax breaks that, even more than the high cost of fuel, are crippling the economy.

Further drilling in Alaska — already a major campaign issue separating John McCain and Barack Obama — would be mainly of propaganda value as a way of convincing the public that our gas-pump prices would drop.

But psychology is not money, and the U.S. doesn’t control the world’s oil output. OPEC does, and for every barrel of oil we pump out of Alaska, OPEC will withhold a barrel of its own, and we’ll always be dependent on OPEC’s oil anyway.

It shies away from commenting on the overall policy dispute over whether to drill deeper into Alaska. Instead, it focuses on the scheme’s impact on revenues. It explains, in dense but ultimately understandable language, just what would happen if the government were to take this new plunge into Alaska:

If producers were able to recover 10.3 billion barrels of oil over the life of the [refuge] area — there is an estimated 50-50 chance that the ANWR coastal plain contains at least this amount of oil — and if oil prices average $90/barrel over the production lifetime of the area, then the federal government is projected to collect nearly $138 billion in revenues over the production period, estimated to be at least 30 years once production commences. This would consist of nearly $95 billion in federal corporate income taxes, and nearly $43 billion in federal royalties.

And that’s a big if. Legislation would have to be passed to drastically change the ratio of oil profits split between the Alaska state government and the federal government, the report notes. Also, the oil companies and their government pals would have to be stopped in their attempt to reduce their tax burden.

(Digression: Keep in mind that the CRS is carefully non-partisan because it’s under the thumb of Congress. And there’s an explanation for this report’s receiving no coverage. As a routine matter, the CRS did not release this or many other reports in the public domain to the public, thanks to its Congressional bosses. The only reason it’s freely and easily available is through the dedicated efforts of the non-government Open CRS, a project of the Center for Democracy & Technology, founded by the estimable former ACLU counsel and Electronic Frontier Foundation board member Jerry Berman.)

Now about those corporate tax breaks: Revenue from corporate taxes throughout all industry in the U.S. has fallen to historically low levels, and that’s the real problem.

The Center on Budget and Policy Priorities noted in a May 9 report — Tax Cuts: Myths and Realities, which also got no play from Mr. Gray Lady or other mainstream news outlets — the hard facts. I’ll quote it at length because you’re unlikely to read or hear about this wonky but important stuff elsewhere:

Since 2001, the Administration and Congress have enacted a wide array of tax cuts, including reductions in individual income tax rates, repeal of the estate tax, and reductions in capital gains and dividend taxes. Nearly all of these tax cuts are scheduled to expire by the end of 2010. Making them permanent would cost about $4.4 trillion over the next decade (when the cost of additional interest on the federal debt is included).

Let’s see: That’s $138 billion over the next 30 years from the Alaska-drilling scheme versus $4.4 trillion over the next 10 years.

More from the CBPP’s Tax Cuts: Myths and Realities:

Because important decisions about these tax policies must be made in the next few years, it is essential to understand their effects on deficits, the economy, and the distribution of income. Supporters of the tax cuts have sometimes sought to bolster their case by understating the tax cuts’ costs, overstating their economic effects, or minimizing their regressivity. Here, we address some of the myths heard most frequently in recent tax-cut debates.

Congressional Budget Office data show that the tax cuts have been the single largest contributor to the reemergence of substantial budget deficits in recent years.

Legislation enacted since 2001 added about $3.0 trillion to deficits between 2001 and 2007, with nearly half of this deterioration in the budget due to the tax cuts (about a third was due to increases in security spending, and about a sixth to increases in domestic spending).

Yet the President and some Congressional leaders decline to acknowledge the tax cuts’ role in the nation’s budget problems, falling back instead on the discredited nostrum that tax cuts “pay for themselves.”

Here’s the real sticker shock:

While the Administration has credited the tax cuts with the drop in the fiscal year 2007 deficit to “only” $162 billion, the 2007 budget would have been in surplus were it not for the tax cuts.

Based on Joint Committee on Taxation estimates, the total 2007 cost of tax cuts enacted since January 2001 was $300 billion (taking into account the increased interest costs on the debt that have resulted from the deficit financing of the tax cuts).

This means that even with the spending for the wars in Iraq and Afghanistan, the federal budget would have been in surplus in 2007 if the tax cuts had not been enacted, or if their costs had been offset.

In other words, if we didn’t have those nasty tax cuts, we’d have enough money for other wars.